Turnaround

Turnaround

Turnaround is the process whereby a business which has been in decline or poorly performing for a period of time is returned to health and profitability. An alternative name for this is a restructuring.

The purpose of a turnaround strategy is to return an underperforming or distressed company to normal in terms of acceptable levels of profitability, solvency, liquidity and cash flow.

The first point is that businesses do not often go from success and prosperity to insolvency or failure in one single step. It takes time and happens in stages.

The initial phase will usually contain occasional instances of inefficiencies in production or distribution and gradually these events will become more regular and it will be possible to see trends. Other signs can be poorer quality products, increase in stock levels, customer complaints becoming the norm, margins beginning to reduce and cashflow starting to worsen. Frequently, however, Management teams do not understand these signs and take no action to address them.

The second stage is more of the same but at a greater intensity. In addition inventory of stocks will reduce as cash is conserved and trade credit accounts are at their limits with some being put on “stop”. Bank facilities start to be breached, the workforce starts to become unsettled with departures becoming more frequent.

The last stage is where systems start to fall apart resulting in breakdowns in management reporting. Scheduling becomes impossible as rush orders become more regular but with poor quality control. Cash collections slow down as customers dispute invoices. With lower stocks and unhappy customers sales decline. So with a departure of customers, suppliers and staff the failure of the business is probable.

Our approach to turnaround starts with diagnosing problems, identifying solutions and finding the resources to keep the business going until the restructuring plan takes effect.

Our turnaround experts can review your financial situation and provide turnaround planning advice. We can then help manage the turnaround process by setting and monitoring objectives and liaising with key stakeholders in order to achieve the rescue your business.